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Call by the NSW Farmers' Association for the privatisation of the Wool Corporation

DAVID GEE: As you heard on the news the balance of payments figure for June was $1.57 billion, pushing the figure for the financial year to over $21 billion. To analyse the figures, we have on the line senior economist with the Commonwealth Bank, Bruce Freeland, and he's talking to Asa Walqvist.

JOHN KERIN: .... isn't all that they are saying is the view that the Government and the Parliament really, at the end of the day has no role in the wool industry. And I think they seriously misunderstand that the Australian Wool Corporation is a statutory marking authority, is an instrument of Government policy, is an instrument of Government management on behalf of the wool growers. And there's some assumption that the Government should not be involved. If the New South Wales Farmers is really serious about privatising the Wool Corporation - and no other State-based organisation or national organisation is saying this sort of thing - well, they would have to convince their fellow wool growers throughout Australia a levy would be voluntary, that the Wool Corporation could raise money to fund their reserve price operations in the market through time, without a Government guarantee on borrowings. And if they really want to get right shot of Government, well perhaps the tax deductibility of the levy shouldn't be given to them.

And I think if they put that sort of proposition to fellow wool growers they'll realise that they're better off where they are. I'm a strong adherent to statutory marketing, and for the wool industry, I think the minimum reserve price really can work, as long as people understand what the ground rules are for it. At present, I think they've got too much anger and it's making their views rather emotional, rather insensible than rational and constructive.

REPORTER: Why do you strongly support statutory marketing boards, yet philosophically let major institutions like Telecom become privatised?

JOHN KERIN: Well, they're totally different organisations. The Wool Corporation is basically a facilitator; it is also a trader and exporter with its own stocks when it has them. But what you're really talking about with Telecom is to try and get competition into the system ... competition in the system, and it's expressed in the auction room so there is no real aim to institute more competition into the system. It is there, but because the competition is atomistic in the case of the wool industry, you have a statutory marketing arrangement. And, as I said, I think it's very sensible and very wise.

DAVID GEE: John Kerin. And our apologies. That was not senior economist with the Commonwealth Bank, Bruce Freeland, talking on the balance of payments. That was John Kerin rejecting out of hand the call from the New South Wales Farmers association for the privatisation of the Wool Corporation.

According to the Senior Vice-President of the New South Wales Farmers, Charles Armstrong, they're going to push ahead with their drive for far-reaching changes. He says they can operate without Government intervention, and although collection of the wool tax, would be a big hurdle.

CHARLES ARMSTRONG: What I have in mind is obviously the indications that were made in the Second Reading speech to Parliament, to the House of Representatives, made by Mr Kerin himself ....

TREVOR CROUCH: What was that?

CHARLES ARMSTRONG: .... in relation to the 1987 Wool Marketing Act. Well, let me just read you one sentence: `At present the Minister for Primary Industry determines the market indicator floor price. This is inconsistent with the Government's objectives of maximum commercial flexibility and autonomy'.

TREVOR CROUCH: Have you got in mind totally privatising the Wool Corporation as such, or do you just want a rearrangement of who's got the final say on the reserve price?

CHARLES ARMSTRONG: No. We're looking at the whole thing. The damage has been done and Mr Kerin's responsible. We're looking at removing the political influence in there which would obviously involve some form of changing to some other way of raising the finance so we don't need Federal Government taxation legislation to do it.

TREVOR CROUCH: Mr Kerin says that he's very strongly in favour of statutory marketing authorities, and he has very big sticks to hold over your head if you don't go along with that. Given that position, do you think there's any chance of taking this any step further?

CHARLES ARMSTRONG: Well, I'm not sure what these big sticks are.

TREVOR CROUCH: Well, let me go through them. What he was saying, basically, once you remove the Government guarantee for borrowings, the Government collection of the wool tax as a compulsory collection, and the possibility that the wool tax may not be tax deductible if it's done privately. They're rather big financial sticks.

CHARLES ARMSTRONG: Well, the Government guarantee on borrowings was removed in the 1987 Wool Marketing Act.

TREVOR CROUCH: But it's back there now.

CHARLES ARMSTRONG: Yes, it was back there only because of the immense damage done to the security given to creditors of the Wool Corporation by the Government's decision. So it had to be rushed back in there. But it is only a guarantee on the current ability to borrow two and a half billion dollars, and is probably not going to be there once this crisis resolves itself.

TREVOR CROUCH: And what about the compulsory collection of the wool tax? There'd be a lot of growers, perhaps, who might try and avoid that, seeing it's so high.

CHARLES ARMSTRONG: Well, that is obviously the biggest area, or at least the hardest area to solve. Now, we believe that the damage that's been done by the political interference is probably far, far greater than any side-stepping by wool growers who are not paying the tax, who are basically in favour of the system. So we've got to weigh that up and find a way out of it.

TREVOR CROUCH: Given that you've got a Minister who appears most unlikely to budge on this, can you, in fact, go any further?

CHARLES ARMSTRONG: I believe we can. I believe Mr Kerin, he recognises, as a result of his meeting with the International Wool Textile Organisation overseas that's he's made a mistake, he's done immense amount of damage, and I believe that he and us are looking for positive ways out of the problem so that it certainly doesn't repeat itself again.

DAVID GEE: The Senior Vice-President of the New South Wales Farmers, Charles Armstrong, speaking to Trevor Crouch.